Know your salary component structure: The income tax law allows deduction of certain expenses from salary up to a specified limit provided the same is a part of your salary component. Expenses such as house rent, medical, conveyance, telephone etc. are non-taxable up to a specified limit and upon presentation of proof of actual payment. The salary components are decided at the time of employment itself.
However, as an employee you can ask for restructuring of salary structure so as to obtain maximum benefit of available deductions.
House loan: One of the basic necessities for every individual is having a house to live in. Realising the importance of accommodation, the tax laws provide for deduction on account for home loan availed. Home loan repayment generally comprises of two parts viz principle and interest.
Deduction of interest can be claimed upto Rs 2,50,000 in case of self-occupied house property and principle deduction can be claimed upto Rs 1,50,000 under section 80C. In the budget of 2016, the government has provided additional deduction upto Rs 1,50,000 for first-home buyers where value of property is less than Rs 50 lakhs and loan amount sanctioned during the period from April 01, 2016 to March 31, 2017 does not exceed Rs 35 lakh.
House rent allowance: Deduction of house rent paid is allowed under two different sections of the Act. First, if house rent allowance is a component of your salary then house rent paid in excess of 10 per cent of salary and up to 50 per cent (40 per cent in case of non-metro cities) of basic salary is deductible provided rent receipts are submitted. If total rent exceeds Rs 1 lakh in a financial year then copy of registered lease agreement alongwith PAN card of landlord needs to be submitted to avail deduction. Secondly, if house rent allowance is not a component of your salary, deduction under section 80GG can be claimed upto Rs 5,000 per month and subject to the condition laid there under.
Two-fold relief on sovereign gold bonds: Physical gold has always been one of the most primitive and preferred forms of investment in India. The government in 2015 approved sovereign gold bond to reduce the demand of gold in physical form. Under the said scheme, bonds denominated in rupees per gram of gold can be purchase by an individual. To make this scheme even more lucrative for the investors, Finance Act 2016 provides a two-fold relief on these bonds. It is proposed to exempt capital gain arising on redemption of sovereign gold bonds. Further, if before redemption the said bonds are transferred then indexation benefit will be available while calculating the long-term capital gain equity linked saving schemes.
Investment declaration has to be filed at the beginning of the year so as to enable your employer calculate the taxes payable by you and deduct taxes per month based on this calculation. Under the new tax regime, the government has prescribed form 12BB in which investment declaration has to be made.
